6 March 1998 External T.I. 9707125 - GRANDFATHERING RULES

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Class 34 par.(k), whether "acquired" in Draft Regulations released September 27, 1994 means "substantial completion"

Position:

Yes

Reasons:

Final version of Reg. promulgated July 28, 1997 uses the words "2 years after substantial completion of property"

					      970712
XXXXXXXXXX                              N. Mondou, M.Fisc.
(613) 957-8961

Attention: XXXXXXXXXX

March 4, 1998

Dear Sir:

Re: Class 34 grandfathering rules

This is in reply to your letter dated March 11, 1997, in which you requested our views with respect to the meaning of "acquired" for the purpose of paragraph (k) of the definition of Class 34 property as proposed in the Draft Income Tax Regulations released on September 27, 1994. We apologize for the delay in responding to your request.

In your letter, you indicated that a taxpayer commenced construction of a co-generation facility that qualified for Class 34 grandfathering on January 1, 1995. The taxpayer completed construction of the facility on January 1, 1997, at which time all of the assets acquired in connection with the construction of the facility became available for use for purposes of capital cost allowance.

Our comments

The final version of paragraph (k) of the definition of Class 34, as added by P.C. 1997-1033, SOR/97-377, dated July 28, 1997 provides that where the property is acquired in circumstances to which paragraph (j) of the definition applies, the required certificate must be issued before the time that is the later of the end of 1995, and 2 years after substantial completion of the property.

Therefore, provided the property referred to in your letter meets the requirements of either subparagraph (j)(i) or (ii) of the definition of Class 34, the 2 year period will start at the time the property is substantially completed.

We trust that these comments are of assistance but caution you that they do not constitute an advance income tax ruling and, accordingly, are not binding on the Department with respect to any particular transactions.

Yours truly,

P. Spice
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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